Orange County Register

Los Al money manager Charles Rother of American Strategic Capital offers up this idea about fixing our market meltdown. (It’s been edited for brevity)  …

The Federal Reserve and Treasury Department should consider purchasing any securities, including domestic stocks or stock indices, they deem substantially undervalued, hold the securities through the crisis and sell the securities, likely at a substantial profit, back to the private sector after the crisis.  This would accomplish four objectives:

• First, a transparent policy of stock support during fire sale episodes would discourage panic  selling.
• Second, a transparent policy of stock support during fire sale episodes would make predatory rumor-driven short selling riskier and less likely.
  
• Third, a transparent policy of stock support during fire sale episodes would encourage long-term foreign and domestic investors and investments.
• Fourth, if restricted to only severe liquidity crises, most likely once in a generation or less, these interventions may yield a hefty capital gain to taxpayers.  Given current valuations, it is quite possible most of the taxpayer’s cost of the current crisis could be paid for by such an action.
  

Given current valuation levels, some extremely undervalued securities may return 100% to 300% for the taxpayer.

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